Helicopters: UK Design and Manufacture

Lord Ashdown of Norton-sub-Hamdon Excerpts

Tuesday 10th July 2018 Lords Chamber

Asked by

[Lord Ashdown of Norton-sub-Hamdon]

To ask Her Majesty’s Government what assessment they have made of the United Kingdom’s ongoing capability to design and manufacture helicopters.

[Lord Ashdown of Norton-sub-Hamdon (LD)]

My Lords, I am grateful for the opportunity to air the Question for Short Debate in my name on the Order Paper, and to the Minister for finding time to answer this debate.

For more than 100 years, the people of Yeovil and south Somerset have provided the nation and its allies with world-beating aircraft, which have played an immense part in the defence of our shores and of our values. Yeovil-built aircraft were among the first to fly in battle over the Western Front in the First World War and provided the first-ever air support to the Royal Navy. Westland Lysanders flew our secret agents into every corner of occupied Europe in World War II. Westland helicopters dropped me on Jebel tops in Arabia, plucked me out of clearings in the Borneo jungle and gave us the mobility we needed in Northern Ireland. They did the same in Afghanistan, Iraq and every other conflict zone.

This debate is not just about the past and celebrating that record; it is also about the future. As we rely more on Special Forces, they will rely more on helicopters for long-range insertion. As the Royal Marines end assaults across defended beaches, helicopters will be the only means to land men in numbers where the enemy least expects them. As the Russian submarine threat grows, it is rotary wing which will arm our ships with the best means of detection and response. Then again, this debate is not just about what our Armed Forces need. It is also about an irreplaceable national aerospace asset. The rotary wing skills found in the Yeovil workforce, now at Leonardo, are found nowhere else in Britain so surely we in Yeovil must feel pretty confident about what comes next. Our brilliant design and engineering teams must surely feel secure about their future. No, they do not. They are beginning to leave in increasing numbers and there is a clear reason for that.

Despite many requests from me and, I am assured, from Yeovil’s Member of Parliament, Marcus Fysh, the Government have made no clear commitment so far as part of the national industrial strategy that they wish to sustain this unique sovereign ability to design, engineer and manufacture our own rotary aircraft. This doubt about the Government’s intentions began when the Ministry of Defence abandoned the policy of the coalition Government, who insisted that an order for Apache aircraft must be subject to a proper competitive tendering process. This included Westland, as it was then. They replaced this with a decision to buy off the shelf and without competitive tender from the United States.

Since then, it pains me to say that every procurement action of the Government has reinforced the suspicion that the Ministry of Defence prefers to buy new aircraft from abroad rather than to make them ourselves, even if the consequence is that a vital national asset is lost and the Yeovil site degenerates, as it threatens to do, into simply a repair and maintenance facility. Over the years Yeovil-built aircraft have been sold to more than 20 countries. They are one of the nation’s major exporters, but what export customers now say—and one cannot blame them—is that if the British Government will not buy helicopters made in Britain, why on earth should they? This is damaging export prospects.

Let me make it clear that this is not a problem for today. The shop floor at Leonardo Helicopters UK in Yeovil has plenty of work for the moment. What we are short of is the engineering work needed now to prepare for and build the new aircraft for the future. What we need is a commitment from the Government that they prefer to buy the next range of aircraft from UK production rather than from abroad.

I cannot believe that this Government wish to preside over the disappearance of a key national capability and prefer to make our Armed Forces dependent on foreign skills when we have such an abundance of our own. I cannot believe that this Government wish to destroy export opportunities post-Brexit, yet that is where we are heading. If this is not what the Government want, it is time to make that clear—and urgently.

Leonardo’s very clear statements on this as recently as this week in Farnborough make that abundantly clear and also make the danger abundantly clear. I am assured that it is waiting to make the investment necessary in research and development, infrastructure and skills to maintain the long-term integrity of Yeovil’s design and engineering teams. However, as Leonardo’s managing director said this week at Farnborough:

“We need some clear commitment …We need to maintain the design and development capability of our work force”.


There you have it absolutely clearly. I appeal to the Government to make this statement without delay—today for preference, in the modernising defence paper due, I hear, by the end of the month if they must, or in the Budget as a last resort. I have to warn them that if this, or something along these lines, does not come by the end of the year, the crucial decisions Leonardo needs to make may not be made, the erosion of Yeovil’s skill base will continue to accelerate and a national strategic industrial asset will stand in grave jeopardy.

In his answer the Minister may stress the Government’s strategic partnership agreements—the so-called SPAs—and may even announce a new one. SPAs are useful and very welcome but they are not the answer. In their present form, SPAs have no impact on the procurement process. That is where we need the action. As part of the Government’s policy to maintain a national capability in the design and production of warships and combat jets, front-line commanders are required to consider indigenous industrial capability in making procurement decisions. This is what is needed and what has been so significantly absent in relation to rotary wing.

Let me sum up by laying out what is at risk here. It always looks cheaper to buy off the shelf, but in this case that would be, in the long term, far more expensive as we lose high-value jobs, export opportunities and a key national asset. It is not just Yeovil and the south Somerset community that stand to suffer from this. Thousands of jobs and substantial high-value, high-tech industrial production elsewhere in the country are already also at risk. Leonardo in Yeovil currently spends more than a third of a billion pounds with suppliers all across the UK, 30% of them small and medium-sized enterprises. In the south of England alone the total value of subcontract business dependent on Yeovil amounts to £275 million pounds—almost a quarter of a billion.

What I am asking is simple and straightforward. The Government have a strategy for preserving our sovereign capacity in the production of fast combat jets, and they have one to preserve our ability to build warships. What we need now and urgently is a clear statement from them that they value and will preserve Britain’s sovereign capability to design, engineer and manufacture our future rotary-wing aircraft. A key national aerospace industrial asset providing the best for our Armed Forces, a workforce whose skills have served the defence of the nation for over 100 years, export opportunities and tens of thousands of high-tech jobs right across the country depend on this. I hope we shall hear it tonight.

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[Lord Ashdown of Norton-sub-Hamdon]

I am grateful for the noble Lord’s helpful contribution, but I want to make it clear that Airbus maintains, changes and alters helicopters; it does not build them. That is a significant difference.

[Lord Stevenson of Balmacara]

I am grateful to the noble Lord for his intervention. I was going to come on to that. My first point is that we have a strong existing helicopter industry which, in part, is led by strong innovation and design. The stress is placed on trying to make sure that innovation comes on the basis of the excellence of the work that has been produced, which is something on which we should build. We need to bear in mind that, without our own helicopters, and other defence aerospace products, we will have to be in the market for others’ designs and projects. Will the industrial strategy work for this sector now and in the future? How will it actually work in relation to helicopters? Reading the industrial strategy in detail, as we have had to do for other debates, we see that there is no mention of helicopters as a particular product, or of the aerospace industry as a key area, although it is mentioned in a number of places. Yet it fits many of the main challenges, including one which is a good strand of the industrial strategy—trying to build on strong, local clusters. As we have heard today, the Yeovil area is very much a place where that is happening.

With a strong existing centre of research, innovation and excellence, what could the country do to try and make something of this for our own consumption and for exports? It is quite clear from the people I spoke to on my visit—and it has been mentioned again today—that the area itself has no problems with the activity going on there. The place obviously has a good sensibility for that, but it will not work if there is no local support. It is quite clear that the area takes great pride in the firms that work there. Everybody around there probably has friends who work in the factory or have had some experience with it. So there is more here than just helicopters. It is about what happens in an area which has a single employer, or a restricted number of them, and there are threats to that.

I will pause at this point to say that it is a little ironic that we are talking about a firm that is owned by an Italian Government-controlled firm; the Government of a fellow EU member have a controlling interest in this operation. I gathered, from talking to people, that there is a sensibility around that the company is prepared to put in more investment here and would be more prepared to do so if it was being matched by the UK Government. Again, we have a problem with what our Government often do. They try to exhort others to take up the load in terms of investment and everything else but do not seem able to do so themselves.

How do we make progress if the industrial strategy is saying that we are looking for locally based, well-constructed, good contributors to our overall economic activity, yet we are not prepared to invest directly? There are obviously other things that Governments can do. The issue, to which I hope the Minister will respond, is that there needs to be some joined-up thinking, and a clear plan for infrastructure and skills development, if we are going to get this area up to the level we want. It is about raising the competitiveness of the whole industrial environment in the south-west. It is not just about helicopters. How best do we promote innovation and train and educate in technical and other skills? How do we have a strategy that plays back to the needs of local people as well as to the economy?

We have had mention of, and I am sure the Minister will also highlight, the Government’s strategic partnering arrangement with Leonardo, which will clearly make a huge difference to how the firm can make the products of the future, such as unmanned aerial vehicles and all their potential technology spin-offs, including battery development and so on. However, there is also the question of how the Government can work with the company and others to stimulate a broader range of inward investment. The irony here is that the area around the factory is very much supported by it; it is very much a single-company town. It is clearly necessary to diversify, but how will that happen? Again, what is the role for Government? Strategic partnering is a major achievement, but it needs to be built on. However, it needs sustained wider government involvement as well as early, clear and efficient procurement decisions that will allow the company to plan properly. Without that, nothing will be successful.

The support here has to come not just from the Ministry of Defence but from BEIS and the Department for International Trade. There is a nascent iAero hub, led by the county council and the local enterprise partnership. Can the Minister indicate what level of support will be available for this from his department, and what can the Department for International Trade do? Does it have any specialists in this area that will be able to support the company as it seeks export markets?

We are all pulling together on the question of productivity—the problem that has bedevilled the UK’s industrial progress over the last 20 or 30 years. It obviously depends heavily on initial skills and on upskilling during a person’s career. There have been calls for the Government to support Yeovil as a centre of excellence area for technological skills, with an institute of technology as a first step in the provision of offers. Can the Minister confirm that this could also be considered?

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)]

My Lords, I thank the noble Lord, Lord Ashdown, for securing this debate and for allowing us a chance to move on, as the noble Lord, Lord Stevenson, put it, from bees to helicopters; I do not know whether that is a more or less important subject, but each to their own, and I am sure that the noble Lord is equally at home talking about bees and helicopters.

I also give an assurance that, although a similar debate to this was answered in the other place by a defence spokesman—and certainly on another occasion a question on these matters was answered by my noble friend Lord Howe, the Minister for Defence—and I am now answering as a Minister for BEIS, all of us as Ministers are answering on behalf of Her Majesty’s Government. It is a matter of equal importance to both departments, just as it is a matter of importance to the people of Yeovil and to the Department for International Trade. I hope to make it quite clear that all departments have an interest in these matters and that all of us could answer on it.

It is also right that the noble Lord, Lord Ashdown, was keen to stress that proud tradition we have in Yeovil and other parts of the country of both designing and manufacturing helicopters. Much of that domestic capability is delivered down in Yeovil by Leonardo helicopters in the noble Lord’s former constituency.

[Lord Ashdown of Norton-sub-Hamdon]

I am sorry to intervene so early. The noble Lord said that “Yeovil and other parts of the country” are committed to the design and manufacture of helicopters. What other parts of the country apart from Yeovil can design and manufacture helicopters?

[Lord Henley]

No other parts of the country, as I will make clear, can do everything. However, there are other interests in this, and in other parts of the south-west, as the noble Lord well knows, the supply chain benefits from all that work in Yeovil.

I will again mention Yeovil, the noble Lord’s former constituency, because he quite rightly praised his successor but one, Marcus Fysh, for all he has done to raise the profile of this matter. I can assure to the noble Lord that my honourable friend Marcus Fysh, the current Member for Yeovil, has been engaged in discussions with Ministers in the Ministry of Defence, including the Minister for Defence Procurement and my right honourable friend the Secretary of State, and with colleagues in BEIS, including my right honourable friend the Secretary of State and others. Again, officials from the department will also continue to be actively involved with Leonardo. I was grateful for what the noble Lord said about the history of what has been going on in Yeovil, and on this day, when we mark the 100th anniversary of the RAF—although the RAF is one of just three services that use helicopters—we are reminded of just how long we have been reliant on helicopters and of the important role they play, not only for the Armed Forces but in other areas.

Last year alone, the Ministry of Defence spent £18.5 billion with United Kingdom industry and commerce, directly supporting hundreds of thousands of jobs in every nation and region of the United Kingdom. We are rightly proud of the leading achievement of our defence sector. It has a turnover of some £23 billion and had exports of almost £6 billion, supporting 142,000 direct defence sector jobs.

Over recent years the Government have spent considerable sums investing in our helicopter capabilities, and over the next 10 years we have a planned spend of £10.6 billion. Much of this investment has obviously been focused on Leonardo, with more than £1 billon spent on the development and manufacture of 62 Wildcat helicopters, some £800 million spent delivering 30 Merlin Mk2 into service and around £330 million spent developing the Merlin Mk4 upgrades across a 25-aircraft fleet, the first of which was delivered to Commando Helicopter Force in May. That investment is vital in ensuring that we have the helicopter capability that we need in the world of defence for decades to come.

As I have just said to the noble Lord, Lord Ashdown, we recognise that Leonardo is now the only helicopter manufacturer in the UK offering end-to-end capability—from research and design through to production, service support and upgrades. The ability to innovate and develop the next generation of rotary wing technologies allows Leonardo to lead the world in blade design and to compete internationally with game-changing designs for the unmanned air systems of the future. That work is supported by my department, BEIS, via the Aerospace Growth Partnership and through programmes delivered by the BEIS-funded Aerospace Technology Institute.

This is not just about military investment. As the noble Lord will be well aware, Leonardo is working to diversify into oil and gas, search and rescue and VIP transport. Again, BEIS has supported Leonardo via innovation programmes and regional growth funding and, most recently, by supporting the new iAero innovation centre at Yeovil—another plus for the town.

The noble Lord, Lord Stevenson, talked about the industrial strategy and the need to develop local clusters. He could have gone on to say how much we emphasise the importance of place in the industrial strategy and the need to work with both local authorities and LEPS. We look forward to seeing what they might come up with in their local plans in due course. We recognise just how important the UK helicopter capability will be to Yeovil and the wider south-west economy. The Government are working to enable support locally, including, as I said earlier, through Local Growth Fund projects that benefit Yeovil, and they are engaging with Leonardo Helicopters and the other organisations that I mentioned, such as the LEP and the county council, to ensure that that support is co-ordinated.

Last year the MoD’s highest spend per person in the UK was in the south-west, where £920 was spent for each member of the population, totalling around £5 billion. Defence spending in the region also supported one in every 60 jobs there—the highest proportion of jobs support by MoD expenditure in the UK, totalling some 33,500.

We fully recognise the capabilities of the UK aerospace industry and its role in ensuring that the UK joint force enjoys strategic and operational advantage. How we deliver future rotary capability for the Armed Forces will be considered in the modernising defence programme as part of the MoD’s work on the industrial strategy and will be informed by our recently refreshed policy. As the noble Lord, Lord Ashdown, put it, the threat is growing and changing and the MoD will reflect on current and future threats as part of the modernising defence programme.

The best way we can help sustain high-quality defence industry jobs is through a competitive, innovative and export-focused industry. Helping industry to grow and compete successfully in the global market is therefore the core objective of the defence industrial policy launched last year. That refreshed policy outlines further steps to help UK industry grow and compete while reaffirming its commitment to the principle of open competition and a free, fair and responsible defence trade.

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[Lord Ashdown of Norton-sub-Hamdon]

I am sorry to take more of the Minister’s time. I notice he has three minutes left. He has been brilliant at identifying that this is not only a community asset for Yeovil but a national asset that is replaceable nowhere else, and has described very well the importance of the high technology there. Perhaps I may ask a direct question. The Government have a strategy to preserve our capability to produce fast jets and ships. This has an impact on procurement. If it is that important as a national asset, will they offer the same opportunity to preserve this unique capacity by making sure that British procurement now prefers Britain to elsewhere as the place where the new generation of aircraft will be produced?

[Lord Henley]

The noble Lord is eternally optimistic if he expects to get a commitment from me today. He is a realist and will have to listen to my speech—with the permission of the House I will go a little beyond 12 minutes—when I set out what we can and cannot say at this stage. He will know that there are reviews afoot and announcements to be made.

The noble Lord will be aware that my right honourable friend the Secretary of State for Defence has invited Philip Dunne to conduct a review of defence contribution to prosperity, which will be published before the summer Recess. He will also be aware that he is not going to get an answer out of me this afternoon and he will just have to live with that.

As stated in this House as recently as 14 June, we have established a long-term close relationship with Leonardo Helicopters through the strategic partnership arrangement. I appreciate that the noble Lord, Lord Ashdown, would like us to go further but he agrees that that has its merits. It is a unique 10-year arrangement from 2016 which allows us to maintain a continuing dialogue with the company to ensure that we are speaking the same language on capabilities, needs and requirements.

However, the Government also recognise that budgetary pressures mean that we are unlikely to be able to maintain national industrial capability in every single area of our defence requirements. The Government will consider maintaining industrial capability where that is in the national interest but, in general, they will continue to operate a policy of competition to ensure best value for money, capability and innovation.

The noble Baroness, Lady Smith, wished to take us on to the wider helicopter market in the United Kingdom, and I hope that the noble Lord will allow me briefly to move away from Yeovil. We are proud to have manufacturing capability in other parts of the country. Airbus provides the majority of police and emergency services helicopters and has the largest share of the UK’s civil and military market. Its main base is in Oxford where it modifies and customises helicopters, although the design and manufacture functions are based in France. We are in contact with and have regular discussions with the company. We are also engaging with the aerospace industry in the United Kingdom across both the civil and defence sector interests. The Aerospace Growth Partnership and the Defence Growth Partnership enable government and industry to engage on a formal basis to tackle barriers and unlock market opportunities across these sectors of the economy. As I made clear earlier in my remarks, that engagement is co-ordinated across my own department, BEIS, the MoD and the Department for International Trade.

Lastly, given that the noble Baroness, Lady Smith, mentioned Brexit, I cannot leave the debate without making a brief mention of it. We understand that the negotiations on our future arrangements are leading to a level of uncertainty for all industries. That obviously applies to aerospace as much as to any other. We are working closely with the aerospace industry and we understand the implications and the opportunities that are presented by the departure of the United Kingdom from the European Union. Through our future partnership with the European Union, we want to explore just how our industries can continue to work together to deliver the capabilities that we need.